Estate Planning

01/21/2019

The average couple receives Social Security benefits of about $26,000 a year, says Farm Journal’s Ag Pro in “5 Retirement Investment Tips.” If that’s an average benefit, then farm couples should expect to receive less than that, because farmers are very good at avoiding taxes, said David Marrison, Ohio State University Extension specialist. If that’s the average income, where’s the rest of the household income going to come from?

When it comes to retirement income, about $26,000 is just not enough. To allow for a comfortable retirement and limit negative impact on the family farm, or any family business for that matter, planning must be done in advance. Here are a few tips that are simple, direct and can make a difference for your retirement.

When are you going to retire? Many people retire at 65. However, the decision often needs to be made from a financial perspective and not based on age. If you can work a little longer, that may give you a better chance of building up enough finances to retire comfortably.

What’s your budget? This is where so many people fail. How much money are you going to need when you retire, starts with knowing how much money you are spending now. For farm and business owning families, some expenses can get co-mingled, such as fuel or utilities. Get into the details and make sure you are not missing any expenses.

Inflation. Recent years have seen a very low impact of inflation but that may be changing. Once you’ve identified your target savings goal, build in inflation. Here’s one way to do it: take the number 72 and divide it by an interest-rate factor. Many experts use 4%, which is the average inflation rate for the last five decades. Using this rule, you can expect your living expenses to double what they are today because of inflation. Sounds scary? That’s why planning is so important.

Make a plan for savings. View retirement as both a means to an end and a way to reduce tax liability. For farmers, good times used to translate into mitigating taxes by purchasing equipment. However, it’s likely that putting away money in a 401(k) might be a better idea.

Start saving today. Even if all you are doing is setting aside 10% for the future, if you are young enough that can be a good start.

Add to these tips getting your estate plan done or updating your estate plan. Your estate plan is a critical piece for farm families who want to pass the farm down to the next generation. In addition to a will or trust, you also need Power of Attorney for your finances and documents for health care. Make an appointment with a local estate planning attorney to get this done.

An estate planning attorney can advise you in creating an estate plan that fits your unique circumstances.

01/18/2019

Your estate plan is really important and that is why you did it in the first place. Don’t let it get out of date, so take a fresh look at any changes in your life that have taken place over the previous year, according to Wealth Management in “Eight Simple Estate Planning Review Items for 2019.”

Here are the eight items that need your attention:

Beneficiary designations. When was the last time you checked these? Beneficiary designations are usually looked at when an account is opened, and often that’s the last time people see them. Look at beneficiary designations for tangible assets, like homes, cars or collectibles. Check legal documents including bank accounts and insurance policies.

Digital asset designations. This is a relatively new area, but very important. Even if you don’t own any cryptocurrency, chances are good you have assets like photos, reward points, websites and more. Each social media platform has a different policy for how accounts are treated on the death of the owner.

Trust funding. This is where many estate plans fall apart. Funding trusts often requires changing titles on bank accounts, homes and other assets into the name of the trust. Major purchases, like a boat or second home, also need to have their titling corrected, so they correspond to trusts.

Documents for adult children. When your children turn 18, they are legally adults and you do not have the legal right to get information or make decisions on their behalf. If you don’t have HIPAA releases, Power of Attorney, and other documents, you may find yourself unable to help in an emergency.

Keep up with life changes. Review your estate plan with an eye to changes in your life: births, deaths, marriages, divorces, big purchases, etc. If you haven’t met with your estate planning attorney or had a phone conversation in a few years, make an appointment now for a review.

Secure photos and memories. How many times have we watched dramatic images of fires, floods, and earthquakes in 2018? Videos, photos, family heirlooms, and artifacts and other irreplaceable items should be stored in some digital format, or in the cloud. If the family includes artists, take photos of paintings or sculptures so at least you have an image of the item should it be destroyed.

Discuss wishes with loved ones. One of the biggest challenges after someone passes, is knowing what they wanted to be done with personal possessions. If you have every Beatles album, unopened, what do you want to happen to your collection? Make inventories and then tell your family what you’d like to have happen with your possessions. You can create a “Legacy Letter” and put it down on paper.

Prepare for incapacity. This is not everyone’s favorite task, but necessary. If you were conscious but not able to speak, what information would your family need? Work with your estate planning attorney to create the necessary legal documents, including medical directives.

“Dying intestate” is the term used to describe the legal status of someone who has died without a will. The laws of your state will then dictate what happens to your assets. Most of your tangible possessions will be distributed following probate. If your estate is complex, for example, and you own property in more than one state, the process will take a long time and the costs will be high. A trust-based estate plan that is updated regularly—can prevent this and many other scenarios.

Some of your assets do not pass to heirs through a will. This includes retirement accounts, life insurance policies and annuities. All accounts that have named beneficiaries go directly to the people who are named. If they predecease you, then the contingent beneficiary receives the asset.

Reviewing beneficiary designations is as important as reviewing your entire estate plan. If you name only your son as the beneficiary for your insurance policy, then later welcome a daughter into your family by birth or adoption, you’ll want to add her as a named beneficiary as well. Otherwise, when you die, only your son will receive the proceeds.

Anytime a life event occurs—births, deaths, divorces, marriages—is the right time to review your beneficiary designations.

You can make these changes while you are living. When you die, the designation is irrevocable.

Your estate plan also needs to include two different types of Power of Attorney (POA). The first is to make financial decisions if you are incapacitated, and the second is to make health decisions.

The person you give the POA to has authority to make these decisions for you, only while you are alive. The POA terminates upon your death.

Most people name their spouse for their healthcare POA, but if your spouse passes and you have adult children, one of them should be named your healthcare POA. Regulations about healthcare have put medical professionals into a difficult situation when they want to have the family involved but are legally unable to share information.

Here’s a celebrity story that serves as a perfect example. A famous father made his third wife his executor and gave her total control over his business, despite the fact that his son was equally famous and the top executive in that business, as well as its public face. The son was baffled when he learned that the third wife now controlled the business, including the rights to his own name. When the father died, a long, expensive and unpleasant estate battle began. The son was Dale Earnhardt Jr.

An estate planning attorney can advise you in creating an estate plan that fits your unique circumstances and can help your family to remain together.

01/11/2019

It would be wise for everyone to have thought things through carefully and chosen a Power of Attorney (POA). It is important to remember that the decision can be changed in the future, according to nwi.com in“Estate Planning: Revoking a power of attorney.”

There are three basic ways that a Power of Attorney can be terminated and the first is the date and time that it specifies, if it contains such language. POAs rarely have termination dates, because they are intended to be “durable” over an extended period of time. However, in certain circumstances, they can have a termination date.

The second way a POA terminates, is at the death of the principal. Once the person in the POA dies, the attorney-in-fact authority ends, with the possible exceptions of making anatomical gifts on behalf of the principal, or the authority to make final arrangements or the authority to request autopsy. Except for these unusual exceptions, the POA ends when the principal dies.

The third way a POA terminates, is when the principal executes a written revocation identifying the POA. For it to be effective, the attorney-in-fact has to receive actual knowledge of the revocation. Until they receive that actual knowledge, the POA revocation is not effective.

To ensure that this is done properly, it is recommended that an estate planning attorney be involved. Depending on the family situation, a letter informing the POA of the revocation should be sent via certified mail, return receipt requested, using U.S. first-class mail. An email and a text follow up should take place, and a phone call would be a good idea.

To make sure there are no deliberate misunderstandings, send a copy of the revocation to institutions that would be potentially targeted by the now former POA—if that is a concern. This includes the bank, financial advisor or any institution that is of particular concern. You want to make sure that these institutions are notified that the POA is no longer in effect.

If the person refuses to sign the certified letter, you will need to prove that notice was given and that the person refused to sign for it. Refusing mail is usually not a persuasive argument to prove lack of notice.

Once the person has been notified of the revocation, it is a violation of law to exercise any authority under it, and the person has liability, if they do so.

An estate planning attorney can advise you in creating an estate plan that fits your unique circumstances.

Most people are uncomfortable talking to their family about death and money. However, talking about your estate plan does not need to focus on either of those things. Telling your family about your estate plan is a chance to talk to your family about values.

It is more important to tell your family why you have done something in your estate plan, than to tell them exactly how much money they will receive. An explanation of the values behind your estate planning decisions should be the focus of the discussion.

An estate planning attorney can advise you in creating an estate plan that meets your unique circumstances and also help avoid future family battles.

12/27/2018

Some states laws that automatically revoke a spousal benefit upon divorce are facing challenges before the U.S. Supreme Court, according to the SCOTUSblog in "Court adds seven new cases to docket."

Estate law will offer you some protection, if you do not update your will after a divorce. However, you may not be allowed to decide who gets any share that would have otherwise gone to your ex-spouse.

There are fewer protections for other instruments that might make up part of your overall estate plan, such as life insurance.

The issue before the Supreme Court in Sveen v. Melin is whether these state laws violate the contracts clause of the Constitution that prohibits the states from impairing contracts. The idea is that a life insurance policy could be part of a contractual relationship between spouses and that automatically revoking the designation upon divorce interferes with that contract.

If you get a divorce, it might be a good idea to go see an estate planning attorney rather than leave the decisions up to the state of your residence.

12/26/2018

There are many reasons why planning ahead for your estate is important, such as preparing for end-of-life expenses as well as the rules surrounding eligibility for Medicaid to pay for nursing home care. Also lurking in the background is the important issue of taxes, according to the Wills, Trusts & Estates Prof Blog in "Federal Estate and Gift Taxes Are a Mortality Risk."

Both federal and state tax authorities are aware that if a person knows he or she will pass away soon, there is a strong incentive to rearrange financial affairs to get around estate taxes. People may be tempted to give their money away on their deathbeds, in order to shrink their estates below the estate tax exemption limit.

For that reason, tax codes include provisions that gifts made within specified time periods before a person passes away, are still considered part of the estate. Other tax code provisions similarly anticipate things a dying person might be tempted to do to rearrange their finances.

Because of these issues, it is important to plan ahead for the estate tax.

An estate planning attorney can advise you in creating an estate plan that meets your unique circumstances and allows you to plan ahead to help protect your loved ones.

12/24/2018

As the holidays near and the New Year approaches, people often think of charitable giving. There are ways to have your donations get the best results, according to the Lebanon Democrat in “A few thoughts on charitable giving, taxes.”

Here are a few ways that your generosity can benefit you and your charity of choice:

Bundle your itemized deductions, if possible. If you can time the payment of qualifying deductible expenses, including charitable donations, do so in alternate years. This increases the chances that you’ll be able to itemize your deductions. You may want to notify the charity that your giving this year is a larger gift, because it will be covering a two-year period.

Select the right assets to contribute to a charity. For outright gifts made in your lifetime, consider using highly appreciated assets, like stocks. This will allow you to bypass owing capital gains taxes on the appreciation and claim the entire value of the assets, as a charitable contribution.

If you make a donation using this method to fund an income-returning gift or a charitable gift annuity or charitable remainder trust, you delay the recognition of the capital gain. In most cases, you can pay this in smaller amounts, over a period of years.

What if you want to make a gift that also generates income? Use a charitable gift annuity or a charitable remainder trust. These gifts typically require significantly higher values, so you may be able to itemize in the year they are funded. However, only a portion of the contribution is deductible. That is because the donor receives income for life or for a certain amount of time. These gifts are usually funded with stock, cash or real estate.

Taxpayers who are 70½ years old or older and required to take minimum distributions from retirement accounts, may have distributions made directly from their account to a qualified charity. If this transaction is done properly, the amount of the distribution is not added to taxable income. You will not receive a charitable deduction using this method, but you can lower your taxable income for the year and give your charity of choice a much-needed donation.

Lastly, consider adding bequests and beneficiary designations in your end-of-life planning. Part of your legacy can include charitable gifts. There are a few ways to do this: designate a percentage of your estate to be donated to charity, specify a charitable organization as the full or partial beneficiary of a life insurance policy, an investment or bank account or any account that transfers by designation or leave a dollar amount or property to a charity.

An estate planning attorney can advise you on creating an estate plan that fits your unique circumstances and can include charitable giving.

12/20/2018

Your heirs may find themselves facing some problems that are difficult to solve, if your digital assets are not organized, according to the White Mountain Independent in “Is your ‘digital estate’ in order?” Among the problems, is the chance of hackers trying to obtain your assets.

First, create an inventory. Use the categories above or create your own. However, you should make it organized.

Document your wishes for how you want your digital assets to be managed. If you don’t specify this, you may be leaving a wide-open arena for long legal battles. Your heirs and beneficiaries may never gain access to them. Hackers might go after them and use your identity. Your heirs may also have to engage in an expensive and protracted battle with a social media giant with costs eating into their inheritance.

Name a digital executor or trustee in your will or trust. This is a relatively new area, but you can name a person to be in charge of your digital assets. Not all states recognize this position, so you’ll want to speak with a local estate planning attorney to find out what the laws are in your state.

You will also need to go through all of your online accounts and learn what each platform requires, in the instance of the account owner’s death.

Review your plans, especially as you add new digital assets.

An estate planning attorney can advise you on creating an estate plan that fits your unique circumstances, including your digital accounts.

The article is based on a Merrill Lynch and Age Wave study revealing that only 14% of 3,300 respondents were making financial decisions on their own, before their spouses passed away.

Widows are tackling major challenges in the days and weeks after the loss of a loved one. That includes everything from funeral costs, mortgage or rent payments, other costs of running a household and for many, medical costs. With nearly half of those in the study reporting a household income drop of 50% or more after the death of a spouse, that is an enormous burden to take on during a time of great grief and upheaval.

The women are also facing the tasks of juggling Social Security, pensions, life insurance and making sure that their late spouse’s retirement accounts are all correctly transferred into their names.

There is often a lack of preparation for this situation. Many are simply not prepared for how complicated it is to deal with the loss of a spouse.

The study reports that couples who plan for this situation, have their level of worry cut in half. Only 38% of the widows in the study who had conducted financial planning, worried about not being able to support themselves immediately after the death of their spouse. That compares to 64% of widows who had not planned at all.

Widowers, men whose wives have passed, face unique challenges. If their wives pass first, they may be faced with taking on their own caregiving. Statistically, women outlive men, so the widowers have to adjust to losing a caregiver. There may be new financial costs they would not have had to bear, if their wives were still alive.

The first step: meet with an estate planning attorney. Make sure that a will, trust and power of attorney are created, along with any other necessary planning documents. Both spouses should be familiar with all accounts, and both names should be on the accounts and all deeds. Don’t forget to organize all important papers in a file drawer at home or in a safe deposit box. Know where everything is and how to access it.